Data defines the model by dint of genetic programming, producing the best decile table.

Retail Revenue Optimization: Accounting for Profit-eating Markdowns
Bruce Ratner, Ph.D.

The mantra in retail is: Offer the right product to the right customer at the right price, and at the right time. But, determining this “right” product- customer-price-time quadruplet is not easily achieved. The standard approach of this four-way optimization is piecemeal: optimizing individually product, customer, price, and time. Then, the four models are “rolled into one,” yielding a suboptimal and ungainly implementation of the combined model. Adjusting the combined model accounting for profit-eating markdowns is based on an ad hoc procedure, yielding another suboptimal and ungainly implementation of the combined model. The purpose of this article is to illustrate a new approach – the GenIQ Model© – for retail revenue-markdown optimization: simultaneous optimization of the product-customer-price-time trinity accounting for profit-eating markdowns. The resultant model, which is optimal and easy to implement, provides strategic information to make the right pricing decisions in pre-season, and make the right markdowns in-season.

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